City & Country: Mid-tier projects in Singapore see strong sales

Fifty-eight-year-old Singaporean Mrs Chua and her husband were at the showflat of The Scala, Hong Leong Holdings’ latest launch, before 10am on July 28. Due to overwhelming response, a ballot system was put in place on the day of the public launch of the 99-year leasehold condominium.

A serialised ballot number was given to every interested buyer who had issued a blank cheque as an expression of interest. According to sources, the developer had to give out 1,700 ballot slips. And with only 468 units in the whole project, there were three times more interested buyers than there were apartments available.

The balloting took place in a large white tent erected behind the showflat. To ensure an orderly flow of people, those whose numbers were picked were ushered in groups of 10 to the showflat, where they were given 10 minutes to decide on the unit that they had pre-selected. The showflat featured typical one-, two- and three-bedroom units so homebuyers could see the kind of unit sizes and quality of finishings they were getting.

Those who wanted to go ahead with the purchase then proceeded to a counter where they made a 5% down payment and signed the option to purchase. They were then led to a waiting room at the white tent where they selected their choice of colour schemes for the flooring, tiles and kitchen cabinets of their new apartments.

Those who didn’t get their desired units were given time to select another. For instance, the one-unit apartment that Mrs Chua had been eyeing had already been snapped up by another buyer, she said. So she had to choose another. The Chuas currently live in a three-bedroom apartment at Chiltern Park, a private 99-year leasehold, 15-year-old condo just across the street from The Scala showflat. Now that their two adult children have flown the nest, they are looking to downsize. “We want a one-bedroom apartment because it’s easier to maintain, and this location is convenient as it’s just next door to the [Lorong Chuan] MRT station, and just one MRT stop from the next shopping mall that is coming up at Serangoon Central,” says Mrs Chua.

Buyers tend to be owner-occupiers
Like her, a significant number of buyers, who are likely to be owner-occupiers, tend to be residents in the Serangoon area who are buying primarily for the location next to the Lorong Chuan MRT station on the Circle Line. Another person interested in buying a one-bedroom apartment was 28-year-old Mr Teo, who also lives in Serangoon. He hasn’t decided whether he will live in the condo himself when the project is completed in 2014, or rent it out. “It all depends on whether prices move further up or not,” he told The Edge Singapore at the showflat.

Families with schoolgoing children are also likely to be attracted to the project, given that it’s near St Gabriel’s Primary School, Yang Zheng Primary School and Nanyang Junior College. It’s also a big draw for those with young families, such as 32-year-old Jeff, who was at the showflat with his 2½-year-old daughter and wife. “We are looking at a two-bedroom unit as it’s just nice for a young family,” he says. Jeff also likes the central location and proximity to the MRT station. The family currently lives at Kovan Melody, a 778-unit development on Kovan Road (off Upper Serangoon Road) that was completed in 2006. It’s also next door to the Kovan MRT station.

Investors, on the other hand, are likely to be lured not just by the proximity of the new condo to the MRT station but also to international schools like the Australian International School, Stamford American International School and the Lycée Français de Singapour, say property agents.

One of the early-bird buyers who snapped up a unit at the VIP preview of The Scala last Tuesday was said to be Harry Chua, chairman of listed group, Hersing Corp, which also owns the ERA real estate marketing franchise. Chua was said to have purchased a one-bedroom unit for more than S$620,000.

By 5pm last Wednesday, at least 75% of the units were already booked. Buyers were a good mix of HDB upgraders and investors, with the majority made up of locals, says Betsy Chng, head of sales and marketing at Hong Leong Holdings. Units, which ranged in size from 474 sq ft for a one-bedroom apartment to 2,142 sq ft for a four-bedroom duplex penthouse, were sold at an average price of S$1,150 psf.

Projects near MRT stations continue to see strong response
It looks like projects on the city fringes and in suburbs in the vicinity of an MRT station continue to see strong response, says Jack Chua, president of ERA Realty, joint marketing agents of The Scala with Huttons Asia.

Demand has likewise been strong at the 172-unit The Terrene at Bukit Timah, developed jointly by UOL Group and LaSalle Investment Management. The project was launched a fortnight ago and as at last Tuesday, 160 units (93%) had been sold. All the four-bedroom units and 30 penthouses have been snapped up, says David Neubronner, head of residential project sales at Jones Lang LaSalle (JLL), joint marketing agents with Knight Frank.

The condo’s location is near the Canadian International School, the German European School and the Swiss School. Popular local schools in the vicinity include Pei Hwa Presbyterian Primary School and Methodist Girls’ School. The upcoming Beauty World MRT station is just a seven-minute walk from The Terrene. The average price of the units at the 999-year leasehold project — a redevelopment of the former Rainbow Garden en-bloc site — was $1,250 psf. “It’s mainly the one-bedroom units that are still available at The Terrene, because most of the buyers are owner-occupiers and predominantly families, so understandably, they would gravitate towards the larger units,” says Peter Ow, managing director of residential at Knight Frank.

Affordable pricing, selective buying
At City Developments Ltd’s 368 Thomson, also launched a fortnight ago, all save one of the 157 units in the project had been snapped up as at last Tuesday, at prices averaging $1,350 psf. The pricing of the freehold condo in prime District 11 is viewed as “value-for-money”, compared with new projects in the vicinity, which are pegged at the $1,800 to $2,000 psf level, says Joseph Tan, executive director of residential marketing at CB Richard Ellis (CBRE). “At the end of the day, buying is still very selective,” he notes.

Given the strong response to The Scala last week, developers with private condos targeted at HDB upgraders and owner-occupiers in the mid-tier market in suburban locations are likely to roll out their new launches as well, says Knight Frank’s Ow. “The Hungry Ghost month is not going to have much of an effect,” he observes.

The test of buyer sentiment is likely to come after the Hungry Ghost month, which is from Aug 10 to Sept 7. Most of the major launches have been scheduled for September and October. The 250-unit Cityscape@Farrer Park by joint-venture partners KSH Holdings and IOI Properties, the property arm of Malaysian conglomerate IOI Group, is scheduled for launch in September. The project is a redevelopment of five small collective-sale sites along Mergui Road, off Rangoon Road. According to sources, the freehold condo could be priced around $1,400 psf.

Other major launches in the pipeline after the Hungry Ghost month are two executive condo (EC) projects. One is the EC at Compassvale Bow in Sengkang, which Frasers Centrepoint and Lum Chang Builders won in a joint bid at $193 million, or $315 psf, in March this year. The other EC site, at Yishun, will be launched by MCC Land, a unit of Chinese state-owned enterprise Metallurgical Corp of China.

Affordability and replacement cost have become major concerns among homebuyers, note property agents, as the private home price index in 1Q2010 saw a 5.6% jump, followed by another 5.3% in 2Q. Buyer resistance to escalating prices is probably also the reason for the drop in transaction volume, with monthly new home sales surging to 2,207 units in April before falling to 1,078 units in May and to 847 units in June. “Sentiment on the ground is still strong, driven by the recent good economic figures,” says Knight Frank’s Ow. “However, the transaction level has dropped, probably because prices have jumped significantly in the last two quarters.”

Cecilia Chow is editor of City & Country at The Edge Singapore

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 818, Aug 9-15, 2010.